CANBERRA, AAP – Some Australians saw a modest improvement in their wages in the final months of 2020 as bosses restored their staff’s pay after the enforced cuts during the COVID-19 pandemic.

However, this was not enough to lift annual wage growth from a record low, and economists expect it will be some time before people enjoy a decent pay rise while unemployment remains high.

Wages increased by a slim 0.6 per cent in the December quarter, double what economists were expecting, and an improvement on the meagre 0.1 per cent rise in the previous three months.

The annual rate of the wage cost index – used by the Reserve Bank of Australia and Treasury in gauging wage growth – remained at a record low 1.4 per cent.

Australian Bureau of Statistics head of prices statistics Michelle Marquardt said the quarterly result was influenced by businesses rolling back short-term wage reductions put in place during the pandemic, returning pay to pre-COVID-19 levels.

“The phased implementation of the Fair Work Commission annual wage review also had a small positive impact on wages,” she said.

Private sector wages grew 0.7 per cent in the quarter, while those in the public sector rose by 0.3 per cent.

Westpac economist Lochlan Halloway says although the labour market has posted a significant recovery since the nadir of the crisis, an unemployment rate of 6.4 per cent as of January is still roughly 1.3 per cent above pre-COVID levels.

“Full employment, which the RBA estimates to be in the order of 4.5 per cent, is still a way off – along with any consequent lift in wages growth,” Mr Halloway said.

The RBA has repeatedly said it will not raise the cash rate until consumer price inflation is sustainably within the two to three per cent target band.

“To achieve this, the bank believes that annual wages growth will need to be running at around 3.5 to four per cent,” Mr Halloway said.

“Such a pace has not been seen since the post-GFC mining boom in 2012.”

Meanwhile, other ABS figures showed construction work completed in the December quarter declined 0.9 per cent to $51.2 billion, dragged down by declines in engineering and non-residential building.

Economists had expected a one per cent rise.

However, residential building rose 2.7 per cent to $17.9 billion in the quarter.

The rise coincides with strong new homes sales and building approvals as Australians take advantage of low interest rates and government incentives, like HomeBuilder.

Overall, building rose by 0.6 per cent in the quarter to $29.4 billion, with non-residential building dropping by 2.4 per cent to $11.5 billion.

“It would appear that late 2020 was probably still too early for business to step up and spend,” RBC Capital Markets chief economist Su-Lin Ong said.

Engineering work also fell by 2.8 per cent to $21.8 billion.